We have upgraded a SharePoint intranet site form SharePoint 2007 to 2010. While I was fixing the minor issues in new site I came across this issue. I could not create any document in document library because the “New Document” option was greyed out in ribbon as shown below.

There was not any issue with permissions as I was the site collection administrator. There are couple of different options to try to fix this issue.

1. Enable “Client Integration” in web application settings.
2. Disable “User Access Control” UAC .Check the following article http://www.petri.co.il/disable-uac-in-windows-7.htm
3. Go to Library > Library settings > Advanced settings  > and  Allow management of content types to TRUE